US Dollar Index Falls to Four-Month Low

The US dollar index recently dipped to a four-month low. While this has made some headlines, many investors still seem to overlook the broader implications.

After hitting above 99 in early January, the index has slid about 1.6%, closing last week around 96.3 to 96.5. At first glance, this drop may not seem significant. However, looking at the bigger picture, the dollar has decreased by more than 10% compared to a year ago.

This shift represents a substantial decline for what is considered the primary currency of the world.

Such persistent weakness typically appears at pivotal points in the global monetary landscape, which seems to be the case now.

It’s important to mention that a weak dollar isn’t necessarily problematic. Many administrations have actually preferred a weaker dollar to boost U.S. exports and balance trade. A lower dollar value makes American goods more competitive internationally, benefiting exporters and multinational companies.

Yet, this decline is more concerning when considering the factors driving it.

What is Causing the Dollar to Fall?

Several pressures are converging:

• Foreign capital outflows are escalating, with countries such as China, Japan, Saudi Arabia, Belgium, and Switzerland reducing their stakes in U.S. debt.

• Cracks are forming in the petrodollar system.

• Global investors are shifting capital towards commodities, emerging markets, and various currencies.

Furthermore, the demand for safe havens has shifted towards gold. Gold has recently surpassed $5,000, while silver is at multi-year highs, as capital moves away from fiat currencies—particularly the dollar.

• The risk of divergence in interest rates is rising. If the Federal Reserve eases while other central banks either maintain or tighten their policies, the yield advantage that has bolstered the dollar could vanish.

• Geopolitical instability is on the rise, from Middle East tensions to U.S.-China relations and growing doubts about U.S. fiscal policy. Investors are diversifying to hedge against dollar risk.

Technically speaking, the dollar has failed to breach the crucial 100 mark and continues to decline. It currently hovers just above significant support at 96. A breach of this level could lead it toward the pandemic low of 93.50 from October 2020.

This isn’t just noise or a standard pullback; it’s indicative of a structural unwinding of dollar dominance.

Delving Deeper into the Dollar Decline

The situation extends beyond the U.S. dollar itself. It’s reflective of pressure on America’s fiscal foundation. As of December 2025, the national debt soared to a staggering $38.4 trillion—this isn’t projected; it’s a current reality.

In just 11 months, the U.S. added $2.3 trillion, averaging around $200 billion monthly, even as global capital markets start to retreat from U.S. debt. This trend can be seen in Treasury bids, Federal Reserve reports, and global balance sheets.

What’s more worrisome is the historical pattern here—a four-stage cycle often precedes the decline of reserve currencies:

1. Rise: Capital flows in, innovation, finance, and trade thrive.
2. Hyperextension: Military growth, increased domestic spending, and skyrocketing debt.
3. Silent Exodus: A calm rotation of insiders without fanfare.
4. Collapse: The reserve currency loses its position globally, inflation spikes, and confidence erodes.

Countries like Spain, the Dutch Republic, the UK, and France have all followed this trajectory and lost their reserve status within three years of seeing capital flight accelerate.

Is It America’s Turn Now?

Foreign central banks are offloading U.S. bonds. The Fed has been trimming profit margins through quantitative easing, but now it’s increasingly compelled to use printed money to buy its own bonds, which isn’t a sustainable strategy. That suggests we may be approaching a critical tipping point.

When considering America’s total debt—including corporate, household, and student loans—it’s now upwards of $38 trillion, which is about 110% of GDP.

• The Netherlands collapsed at 250%.
• The UK lost reserve status at 130%.

Despite this, many U.S. investors continue to cling to traditional buy-and-hold portfolios filled with dollar-denominated assets that carry inherent risks.

Buy-and-Hold Investing Isn’t Over

Yet, it’s clear we need to move beyond blind faith in these assets. For those with portfolios heavily focused on U.S. stocks and bonds, it might be time to reassess.

I’m not suggesting an abandonment of all strategies, but rather an adaptation. The old rules no longer apply. Investors willing to put in the effort to understand these changes can stay ahead of the dollar’s ongoing decline.

Inflation has become more than just a statistic; it now permeates capital flight, shifts in foreign exchange reserves, and global diversification.

Protecting Against Dollar Decline

The hard asset strategy I mentioned remains crucial. Demand for assets like gold, silver, and platinum continues to grow, not out of fear, but as practical safeguards against the dollar depreciating.

We also need to broaden our approach. Non-dollar foreign bond funds and ETFs can be effective tools for protecting portfolios. These assets help mitigate political and currency risks, particularly when they involve countries with better debt-to-GDP ratios and sound fiscal policies than the U.S.

Look for funds with currencies like the Swiss Franc, Norwegian Krone, or Singapore Dollar, which are backed by more stable fiscal foundations and real reserves.

Investing in Defense Stocks Amid Weakness

With the dollar weakening and geopolitical tensions increasing, there’s a pivot toward national security sectors. Defense spending is no longer optional but strategically essential.

Despite significant debts, the Trump administration has recently expressed its intention to boost military spending by up to 50%. One straightforward way to capitalize on the expected growth in this industry is through stocks that have high Weiss ratings.

Your Best Defense is a Strong Defense Stock

The iShares U.S. Aerospace & Defense ETF (ITA) features a robust lineup of leading contractors and aircraft manufacturers. While this fund has a “hold” rating, it’s still positioned to deliver more reliable performance than lagging stocks.

Alternatively, you can consult Weiss Ratings Plus to explore top-rated defense stocks.

ITA’s leading holdings include General Electric (G.E.), Raytheon (RTX), Boeing (BA), Lockheed Martin (LMT), and Northrop Grumman (N.O.C.), all of which are poised to benefit in a new bull market while many technology stocks stumble.

Lockheed recently received an upgrade, while Boeing is currently on hold. Over the past year, RTX has gained 55%, GE is up 51%, Northrop by 45%, Lockheed by 44%, and Boeing by 31%. Some might wonder if they still have room to grow; I would be surprised if they didn’t.

The U.S. defense budget is set to rise by over 10% in fiscal year 2027, indicating continued expansion in this sector. It’s not just a hedge; it’s becoming a growth engine.

General Electric, for example, had a solid track record until 2017 as part of the Dow Jones Industrial Average and has paid dividends for nearly 120 years except during financial crises. They reinstated their dividend in 2021 and even recently announced an increase.

Doesn’t that sound appealing for investment?

Hold that thought. There’s something new I need to share regarding the Weiss Ratings website.

Introducing: Dividend Power Score

The site has been revamped, now featuring a Dividend Power Score for high-dividend stocks. GE, for instance, boasts a score of 91 out of 100. We determine this by looking at:

• Consistency: A dependable history of dividend payments.
• Ability to pay: Including free cash flow and the portion of profits distributed as dividends.
• Dynamic growth: The likelihood of stock price growth accelerating.

So, considering GE’s recent dividend history and that high score, it certainly indicates a strong investment potential.

Comparing GE’s score of 91 against other top defense stocks shows Boeing, which currently offers no dividends at all.

While the upgraded information is accessible to everyone, only Ratings Plus members can see individual Dividend Power Scores. Clearly, GE stands out with the highest Dividend Power Score of 91 among this group.

This surpasses the minimum threshold in our recent Weiss Income Multiplier publication. Yet, after applying our rigorous criteria, GE was still not selected for today’s recommended list.

Editor Nils Mative and Mandeep Rai are focused on identifying stocks likely to provide returns exceeding investments while steadily increasing their dividends and stock prices.

They work alongside Dr. Martin Weiss, who actively invests in these stocks himself.

This strategy is ideally suited for the current climate, where the dollar’s value is decreasing. Please share your thoughts on this approach.

In Summary

A falling dollar isn’t a distant problem; it’s already happening and won’t simply disappear. Is the future of the United States and its currency predetermined? That doesn’t have to mean that fiscal responsibility will miraculously appear amongst leaders who have avoided it for decades.

There’s no cause for panic, but action is necessary. In this market environment, passivity will negatively impact investors, while flexibility can yield rewards. History shows the consequences when an empire extends itself so far that its currency loses global credibility, and those signs are reappearing.

No, this isn’t the end of buy-and-hold investing, but rather a significant shift in its beginning. Those who seek to adapt and protect their capital smarter will find opportunities.

The next steps are crucial, so it’s time to get moving.

Best of luck,

Dallas Brown